Chapter 8 : Introduction to the Different Functional Areas of Management

Chapter 8:
Introduction to the
Different Functional
Areas of Management

FUNCTIONAL AREAS OF MANAGEMENT
Human
Resource
Management
Marketing
Management Operations
Management
Financial
Management
Information &
Communication
Technology
Manage-
ment
Office
Management
Material &
Procurement
Management

Human Resources Management
Human resources, also known as human capital, drive the
performance of organizations along with other resources; hence
understanding the HRM functions of mangaement is very important.
These include:
 Conducting Job Analysis
 Planning Labor Need and Recruiting
 Selecting Candidates for the Job
 Orienting and Training New Employees
 Managing Compensation or Pay
 Providing Incentives and Benefits
 Evaluating Employees' Performance
 Communicating
 Developing Employees
 Building Employee Commitment
 Providing Good Working
Conditions
 Handling Grievances and
Industrial Relations

Conducting Job Analysis
• Job analysis is the process of obtaining information of jobs needed
to achieve the organization's goal/ objectives by determining the
duties, tasks or activities involved in jobs. Job analysis data may be
gathered through interviews, questionnaires, observation and
diaries. These may also be collected through position analysis,
critical incident method, task inventory analysis, and competency-
based analysis. Decision-making regarding job-related problems is
done objectively by analyzing the requirements for each job.

Planning Labor Need and Recruiting
• It is important to determine the number and kind of people that may
be attracted for employment. External recruitment enables the
organization to fill job openings with special qualifications and to
employ a person with new knowledge, skills, values, ideas, and
perspectives. Internal recruitment may also be done if management
finds it more advantageous to promote or transfer present employees
to fill the job openings. Recruitment from within the company is said
to be less expensive as existing employees no longer need extensive
orientation programs.

Orienting and Training New Employees
• This is done in organizations so that they could contribute to the
achievement of their organizational goals'/objectives' achievement. The
phases involved in this function are:
 conducting needs assessment of the organization, of the person, and of the task/work;
 designing the training program by considering the institutional objectives, the trainees'
readiness and motivation, and the principles of learning;
 implementation of the training program for non-managerial employees using: on-the-job
training, apprenticeship training, cooperative training, internship, government training,
classroom instruction, e-learning, and others; and
 evaluating the training program in order to determine effectiveness, considering:
reactions, learning, the behavior of the trainees, return on investment (ROI) or results and
benchmarking.

Managing Compensation or Pay
• Compensation or pay represents a reward received by
employees in exchange for their contributions to the
achievement of organizational goals. In doing so, pay
equity must be considered. It must be fair and just,
acceptable to all concerned parties, and commensurate
with the value of the work performed. It is important as
it determines job performance motivation of workers.

Selecting Candidates for the Job
• This involves the matching of people and jobs. Job
specifications help identify the person-job fit, and, in
particular, identify the individual competencies, their
knowledge, skills, abilities, and other factors that may
lead to excellent performance. Managers may use
different selection methods such as interviews,
psychological tests, calling references, and others.

Providing Incentives and Benefits
• Incentives are generally based upon a pay-for performance philosophy which�
means that a performance "threshold" or a baseline performance level must be
reached by an employee or group of employees in order to qualify for incentive
payments. Examples of individual incentives are bonuses, merit pay, and sales
incentives, among others. Group incentives include team compensation, scanlon
plan, and improshare. Enterprise incentives are profit sharing, stock options, and
employee stock ownership plans. Benefits, on the other hand, include social
security, workers' compensation, health care and educational assistance,
vacation leave, sick leave, life insurance, retirement benefits, and travel
benefits, among others. It is important that incentives and benefits programs be
based on specific objectives compatible with the organizational philosophy and
policies and on the organization's financial standing.

Evaluating Employees' Performance
• Appraisal of employees' performance, on a regular basis, is done to
find out who are doing their jobs well and who are not. The
purposes of such evaluations are administrative and developmental.
Administrative purposes include aiding in decision-making regarding
employees' pay and promotions, transfers, or layoffs, based on their
achievements and performance. The developmental purpose of
appraisal is the use of results for discussing employees' strengths
and weaknesses and for listing down performance improvement
needs.

Communicating
• To be effective, managers must have good communication skills, both oral
and written or through the use of information technology. This is necessary in
order to receive and disseminate pertinent information needed by all
organization members in carrying out activities that will lead to the
achievement of company goals/objectives. Besides carrying out internal
communication, managers must also have good communication with
customers, suppliers, and other stakeholders in the external environment.
Communication may be hindered by barriers and breakdowns in the
communication process. Identifying these barriers and learning how to listen
well will facilitate both understanding and managing.

Developing Employees
• Programs designed to meet the special needs of employees
will prepare them for future jobs or roles that they may be
assigned to do. These may include graduate studies, cross-
training or the process of developing employees to do multiple
jobs within an organization, or ethics training or the process of
developing employees' moral judgments that will help them
determine right and wrong behavior, which they could use in
jobs that require more decision-making functions.

Building Employee Commitment
• This is another important function of HR
practitioners as this will bind them to engage in
activities that will ensure the achievement of
organizational goals/objectives. This must be
followed by employee accountability or accepting
responsibility for one's actions.

Providing Good Working Conditions
• This includes giving a clear statement of the
company's mission, vision, goals, and objectives,
offering a good compensation and benefits package,
preparing a well-ventilated, well-lit, and pollution-
free work area for employees, and practicing ethical
management styles, among others.

Handling Grievances and Industrial
Relations
• When differences arise between labor unions and management,
these are usually settled through the grievance procedure,wherein
the feelings, needs, and desires of both parties are aired. Managers
must try to master the art of handling grievances and industrial
relations to bring about industrial peace in their organization.
Again, it must be emphasized that satisfied workers are more
motivated workers, who are, in turn, more effective and efficient in
performing their assigned tasks; thus, they hasten the attainment of
their company's set goals/objectives.

Importance of HRM
Human resources management deals with the
management of people—the most important business
resource. Money, materials, and information resources
are not capable of moving the business activities
without the aid of the primary performance drivers, i.e.
human resources. Therefore, mastering the activities
involved in human resources management (recruitment,
selection, placement, training, and development) is a
must since all other management activities (planning,
organizing, staffing, leading, and controlling) could be
done easily if organization managers practice proper
human resources management.

Marketing Management
The marketing management functions of management include the following:
1. Analyses, planning, implementing, and controlling of goods, services, and ideas to create exchanges
that satisfy customer needs and company goals.
2. Management of marketing resources.
3. Analyze, plan, and implement marketing programs that aim to bring about an expected level and mix
of business deals with target markets.
4. Stimulate demands for the products of the company.
5. Make crucial decisions that will ensure the company's competitiveness.
6. Make sure that marketing techniques employed are efficient, effective, and socially responsible or
ethical.

Analyses, planning, implementing, and controlling of
goods, services, and ideas to create exchanges that satisfy
customer needs and company goals.
• Analyses of demand management start with the gathering of data through marketing
research. Activities under marketing planning include decision-making on target
markets, market positioning, product development, pricing, distribution channels,
physical distribution, communication, and promotion. The implementation of the
marketing plan is formally carried out by sales managers, sales people, advertising
and promotion managers, and customer service managers, among others.
• Controlling refers to monitoring of the marketing plan's progress. Goals and budgets
are set for each month or quarter. A review of the results follows in order to identify
businesses that are not attaining their goals. Managers of unsuccessful businesses
must explain what the problem is and propose contingency plans or steps that
management has to take in response to such negative developments.
1.

Management of marketing resources.
• Marketing resources include sales people,
advertising, and marketing research.
 Management of salespeople
 Management of advertising
 Management of marketing research
2.

Management of Salespeople
• Management of salespeople involves inculcating the
establishment of satisfying long-term relations with
customers, suppliers, and distributors in order to help their
long-term preference and business. Good marketers are
able to maintain win win relationships by seeing to it that�
they always deliver high quality, good service, and fair and
reasonable prices to the key parties that they deal with
over a long period of time.

Management of Advertising
• Although used less frequently than sales calls in business
markets, is still important in marketing. It can perform the
following functions: build awareness, build comprehension of
the good features of the product or service, remind
prospective customers about the product, and lead customers
to get in touch with sales representatives through brochures
with the company’s contact information.

Management of Marketing Research
• This involves identifying the seven (7) characteristics of good marketing research characteristics.
 The principles of the scientific method are used.
 Research creativity is practiced by using innovative ways to solve marketing problems.
 Multiple methods of research are used in order to adapt the method to the problem.
 Interdependence of models and data which recognize that data are interpreted from underlying models.
 Value and cost of information are concerned with estimating the value of the information against the
cost; this helps the marketing research department determine which projects to prioritize.
 Healthy skepticism enables researchers to show a healthy questioning of the hurried assumptions made
by managers about how a market works.
 Ethical marketing research is concerned with research that benefits both the sponsoring company and the
consumers; self-serving results may mislead consumers to buy the company's product which, in reality, is
not good or effective.

Analyze, plan, and implement marketing programs that
aim to bring about an expected level and mix of business
deals with target markets.
• It is important that analysis and planning precede the
implementation of the marketing program, to ensure that its aim
will be achieved. Strategic planning for individual business entails
defining the business mission, analyzing the business' external and
internal strengths and weaknesses, and formulating goals and
strategies. In doing so, the implementation of the marketing
program will go smoothly and the chances that it will achieve its
aim of bringing about an expected level and mix of business deals
with target markets will be increased.
3.

Stimulate demands for the products of
the company.
• This is achieved by influencing the level,
timing, and composition of demand,
bearing in mind the attainment of the
company's objectives.
4.

Make crucial decisions that will ensure the
company's competitiveness.
• These are decisions regarding target
markets, development of products, good
distribution, positioning in the market,
and 'setting of right prices for their
products.
5.

Make sure that marketing techniques
employed are efficient, effective, and socially
responsible or ethical.
• Marketing managers and their team members
must be able to balance their own best interests
(big sales commissions, recognition, or
promotion) with the best interests of their
company, consumers, and society.
6.

Importance of Marketing Management
Marketing management is important because it is
the key to organizational goal attainment, customer
satisfaction, and profit gain. In the absence of major
marketing management process – planning, execution,
pricing, and promotion and distribution of goods,
services, and ideas to create exchanges with target
groups – satisfying customers and achieving
organizational goals will not be possible.

Operations Management
• Business managers today focus on productivity, technology use, quality of
goods and services, customer satisfaction, and speed. They are conscious
that they need to innovate on their processes and activities in order to
succeed in a highly competitive globalized market. Because of these, the
operations management functions of management must include the
following:
 Overseeing the transformation processes that change resources into finished
goods and services.
 Improvement of productivity and competitive advantage.
 Managing the sequence of activities and information along the whole course
of the value chain.

Overseeing the transformation processes that change
resources into finished goods and services.
• In order to do this, managers must address resource
acquisition inventories, facilities, workflows,
technologies, and quality. In doing so, productivity
and competitive advantage will be ensured as they
accomplish the multiple processesthat transform the
various resources- in the form of people, material,
equipment, and capital-into quality finished products
and services.

Improvement of productivity and
competitive advantage.
• Productivity measures the efficiency by which inputs are turned into outputs. The basic
equation for productivity:
• Competitive advantage is a competency of an organization to outperform a competitor or
competitors. To ensure productivity, work processes must be subjected to complete analysis
and redesigned, if necessary, through process engineering. Other ways to ensure productivities
are process value analysis and re-engineering. In process value analysis, all elements of a
process and their workflows are analyzed to be able to know their contributions to key
performance results. Reengineering discards work steps that are not needed, combine other
work steps, and uses technological know-how to reduce costs and also ensure efficiency and
effectively. Competitive advantage follows when organizations improve their productivity.

Managing the sequence of activities and information
along the whole course of the value chain.
• Proper management of these activities and
information results in the creation of finished
products and services that have value to customers.
Elements in an organization's value chain include
inflow of resources and materials, organizing of
resources and materials, creating goods or services,
distributing finished products or services, and serving
of target customers.

Importance of Operations
management
•Through the study of the essentials of
operations management, businesses of
different types and sizes may increase their
chances of survival and success in today's
business environment which is characterized
by intense competition and desire for
innovative quality products and services.

Financial Management
• Gaining profit is the main goal of businesses. To attain this goal,
managers must be able to practice good financial management and
this, of course, starts with understanding the financial
management functions of management. These functions include:
 Taking charge of the company's financial policies and strategies,
investments, capital structures, and dividend policies.
 Financial management and control.
 Financial planning.

Taking charge of the company's financial policies and
strategies, investments, capital
structures, and dividend policies.
• Financial managers of organizations must be able to formulate sound
financial standing plans that will communicate broad guidelines for
their financial decisions and strategies. These include, among others,
typical financial policies that address the organization's investments,
capital structures, and dividend policies. Investment policy covers
choice of product lines and capital project. Capital structure policy
covers working capital policy (for the balancing of assets and
liabilities); and leverage policy (for balancing long-term
financing).Dividend policy considers the use of either a systematic
pattern of earnings retention or dividend distribution.

Financial management and control.
• The management and custody of the organization's funds also include control which makes sure that these said
funds are properly utilized to provide for all the organization's needs. Examples of standard financial management
and control practiced by organizations are project managementwhich makes sure that long-term projects are
implemented according to previously planned budgets and checks if these have yielded forecasted cash returns;
working capital management. This includes cash, accounts receivable, and inventory management. Cash
management makes sure that there is enough cash balance, that idle cash is invested in marketable securities, and
that proper cash control rules are instituted. Accounts receivable management ensures that accounts receivable
investments are optimized and that sound credit evaluation and collection proceduresare formulated.
• Meanwhile, inventory management determines inventory levels by making maximum use of trade-off between
inventories carrying cost, ordering cost and lost sales opportunities. It also institutes good stable inventory control
procedures. Fund sources management identifies short- and long-term funds that may be available and transact and
keep watch of credit facilities with banks and other financial institutions. Dividend policy implementations
determine the form and amounts of dividends and schedule their payments.

Financial planning.
• Financial planning is the process of setting
financial objectives and determining what
should be done to accomplish them. This
includes financial forecasting, financial
analysis, and financial performance
evaluation.

• Financial forecasting involves cash budgeting, profit planning, and balance sheet
forecasting.
• Cash budgeting is a forecast of cash needs and sources. Profit planning is a forecast of
revenues and expenditures.
• Balance sheet forecasting considers future assets, liabilities, and the organization's net
worth position.
• Financial analysis involves capital budgeting techniques, operating leverage analysis,
financial leverage analysis, and analysis of pricing and costs.
• Capital budgeting involves the assessment of long-term investments.
• Operating leverage analysis critically examines cost-volume-profit relationships, and
• financial leverage analysis studies the effect of debt on income to the organization's
common stockholders.
• Analysis of pricing and costs of products, materials, supplies, and
production/manufacturing also falls under financial analysis.
• Financial performance evaluation refers to the assessment of financial ratios to indicate
the overall performance of the organization, as well as the assessment of market-wide
financial indicators.

Importance of Financial Management
• Financial management facilitates the choice of investments, financial policies, and operating
mechanism of the organization in order to effectively achieve its goals and objectives, which
includes maximizing its profits as well as those of its shareholders and stockholders. In doing so,
financial shareholders and such other goals are satisfied. Managers are able to maximize the
wealth of the organization and its shareholders are actively participating in present societal
concerns, among others.
• To be able to accomplish the above mentioned functions that give importance to financial
management in organizations, control techniques that measure the company's financial
soundness, management effectiveness, production and service efficiency, and human resource
attitudes and morale, must also be considered. These include the following:
 Break-even chart – used by the organization's financial management planners and accountants to identify how the
various sales levels affect the income and profits of the firm; the break-even point is the level of operations that
shows equal income and expenses incurred by the company
 Financial statements – these include income statements, balance sheets, and cash flow statements carefully
analyzed after examining them thoroughly. The company's viability is determined by these techniques.
 Financial ratios – these make use of the above-mentioned financial statements to determine the formulation of a
series of ratios that will, in turn, determine if the company is stable or unstable, strong or weak and on the road
to bankruptcy. Examples of such ratios are the rate of return on capital invested, rate of return on assets, rate of
return on sales, and others.

Importance of Financial Management
• Another functional statement used in financial management that also
emphasizes its importance is the organization’s budget. This states the
amount of money that the company will spend and receive during a
future period of time. At the end of the period of operations, actual
expenses and budgeted amounts are compared to see whether the
company has operated under or over budget. Differences allow
management to examine specific expenditures and the reason behind
such. Managers and department heads will then be forced to quantify
their sales objectives and other company targets because these must be
expressed in pesos and not in general statements or hopeful or optimistic
expressions. Budget preparation in financial management, therefore, is
important in management decision - making, and this must be prepared
well on a regular basis by all organizations.

Material & Procurement Management
•It is the process of planning, organizing,
staffing, directing and controlling the
procurement activities.
•It is important to consider the procedure in
the proper delivery of materials and supplies
at the right place, at the right time and from
the right place.

Material & Procurement Management
• Purchasing – process of buying, identifying the
need, selecting supplies, negotiating prices, and
following up to insure effective delivery.
• Procurement – encompasses broader areas and
covers the responsibilities performed by
purchasing, such as inventory control, receiving,
incoming inspection and salvage operations.
Covers production control, traffic and shipping.

Importance of Procurement
1. Proper utilization of money is extremely important
to the survival of every individual and company.
2. Purchased materials and services include the
biggest part of expenditure in most companies.
3. The investment in raw materials, parts, and
supplies inventory in some companies is essential
and the efficient management of such inventory can
contribute to profit.

Office Management
•It is the process of planning, organizing,
staffing, directing, and controlling office
activities and those performing them in order
to achieve determined objectives.
•It covers managerial efforts over office work
anywhere in the company.

Activities in
Office
Management
 filing records and reports
 handling incoming
and outgoing mail
Determination
the action to
accomplish the work
selecting office methods
and procedures
 selecting office location
Providing effective
office organization
delegating authority
knowing individual jobs
Inspiring office
personnel
motivating office employees
 giving adequate supervision

Increases office efficiency
Public relations
Managing change
Achievement of goals
•
•
•
•
Minimization of cost
•
Smooth flow of work•
New challenges
•

Information and Communication
Technology Management
Management in the 21st century, without a doubt, is driven by
information and communication, networked digitally and ever-changing.
Computers provide more data about more things to more individuals,
groups, or teams in organizations, more quickly than ever before; hence,
the study of the information and communication technology management
(ICTM) functions of management is relevant. These include the following:
 Developing the organization's hardware, software, and other computing and
communicating technology.
 Developing the organization's management information system (MIS) tailored
to the needs of the firm's units.
 Encouraging e-commerce through Internet use.

Developing the Organization's Hardware, Software,
and other Computing and Communicating
Technology
• IT encompasses different kinds of technology, such as various
types of hardware (examples: computers and printers),
software (example: operating systems), and computing and
communication technology (examples: telecommunications
and management of databases). The fast rate at which these
are changing requires managers to be ready to develop and
adapt to new technology.

Developing the Organization's Management Information System (MIS)
Tailored to the Needs of the Firm's Units.
• IT has developed management information systems that
gather, process and disseminate internal and external
information to the company on a timely basis in order to
support managers in their tasks. Electronic equipment
makes fast and reasonably priced processing' of voluminous
amounts of data possible. The computer can process data
and provide logical conclusions, and classify and prepare
them for use in decision-making.

Encouraging E-Commerce Through Internet
Use
• Through e-business strategies, the company gains competitive advantage over competitors.
Common e-business strategies involve business to business (B2B) and business to customer
(B2C) transactions. B2B transactions use IT and web portals to link companies with
members of their supply chains or those dealing with their resource supplies. B2C
transactions also use IT and web portals, but in this case, the link created is one between
the company and its customers. A common example is e-tailing or the sale of goods
directly to customers via the Internet. Other web-based business models are brokerage
that brings buyers and sellers together; advertising that provides information while
generating revenue from advertisement; merchant model, or selling products through the
web; subscription modelor the selling of access to a website; infomediary model or the
collecting of information on users and selling it to other businesses; and the community
model that supports websites by asking for donations from users.

Importance of Information and Communication
Technology Management
• The widespread use of ICT has brought about the emergence of a
"knowledge society" due to easy access to information at low costs
through the Internet. Management may use it for its different
managerial functions. It may be used for scenario planning or
identifying future scenarios in the business environment, which
may need careful planning; decision-making through the use of
information generated by IT; aiding teamwork; facilitating
productivity measurement; communicating easily; selling
worldwide through the Internet; and many others. It may be said,
therefore, that ICT has revolutionized the business world.

Reference:
Cabrera, H., Altarejos, A., & Riaz, B.
(2016). Organization and
management. Quezon City,
Philippines: VIBAL Group Inc.

Chapter 8 : Introduction to the Different Functional Areas of Management

Chapter 8 : Introduction to the Different Functional Areas of Management

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Chapter 8 : Introduction to the Different Functional Areas of Management